News & Insights

The Tentative Death of the FLSA Salary Threshold Increase

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I have blogged several times regarding the unfolding saga of the FLSA rule that was set to increase significantly the salary level required for many positions to be deemed exempt from overtime pay law (the “2016 Final Rule”) – making the requisite salary level $913 per week.  Those interested to read about the unfolding of the story are welcome to explore my prior blogs.  This serves as an update.

 

On July 26, 2017, the Department of Labor (the “Department”) formally posted of a “Request for Information; Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees” (the “Overtime RFI”).  In that Overtime RFI, the Department noted that the litigation challenging the 2016 Final Rule is currently pending before the Fifth Circuit Court of Appeals and in the U.S. District Court for the Eastern District of Texas.  The Department also noted that, by district court order, the Department is enjoined from implementing and enforcing the Final Rule. See Nevada, et al., v. U.S. Dep’t of Labor, et al., 218 F. Supp. 3d 520, 534 (E.D. Tex. 2016), appeal pending, No. 16-41606 (5th Cir.).

 

In the Overtime RFI, the Department summarizes that the Department of Justice, on behalf of the Department, is arguing that 29 U.S.C. 213(a)(1) provides the Secretary of Labor authority to establish a salary level test.  However, the Department also notes that, as stated in the Department’s reply brief filed with the Fifth Circuit, the Department abandoned advocacy for the specific salary level ($913 per week) set in the 2016 Final Rule – instead opting to undertake further rulemaking to determine what the salary level should be.  The Department explains that “[i]n light of the pending litigation, the Department has decided to issue this RFI rather than proceed immediately to a notice of proposed rulemaking (NPRM).  The Department believes that gathering public input on the questions below will greatly aid in the development of an NPRM and help us move forward with rulemaking in a timely manner.”

 

In terms of what future rules might look like, the Department states that it is seeking to “lower regulatory burden.”   One particular issue being focused on is best summarized through these two questions, on which the Department seeks responses:  (1) does the standard salary level set in the 2016 Final Rule work effectively with the standard duties test or, instead, does it in effect eclipse the role of the duties test in determining exemption status; and (2) at what salary level does the duties test no longer fulfill its historical role in determining exempt status?  Following from that, I wonder . . . might we come to a point that paying a sufficient level of salary renders a duties analysis unnecessary?  There are other also interesting issues raised by the Department, for which the Department seeks input.  Taken together, the questions for which the Department seeks comment and information signal that we might see much more significant change to FLSA that could significantly alter how overtime exempt status is analyzed in the future.

 

Written comments are due on or before 11:59 p.m. on September 25, 2017.  Comments can be submitted electronically here or by mail to Melissa Smith, Director of the Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue N.W., Washington, DC 20210.

 

Another update pertains to the aforementioned district court case.  On August 31, 2017, a Texas federal judge granted the plaintiff’s motion for summary judgment, invalidated the 2016 Final Rule, holding that the Department of Labor exceeded its delegated authority by increasing the minimum salary to $913 per week.  The Memorandum Opinion and Order can be found here.  This holding is not merely redundant with the prior injunction.  Now, the 2016 Rule itself has been determined, as a matter of law, invalid.  In theory, that decision could still be appealed (e.g., by the AFL-CIO).  But any appeal is highly unlikely to come from the Department of Labor – who technically is the losing party in the case.  Indeed, the holding actually provides the outcome that the Department of Labor advocated for in its reply brief with the Fifth Circuit Court of Appeals.

 

The saga in litigation may or may not be over.  But the most interesting game to watch at this point is the new rule making effort.  Stay tuned for further developments.

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